Non-Competition Agreements or “Non-Competes” are a type of “restrictive covenant” included in many written employment-related contracts. This includes both employment contracts and severance agreements.
Employers include restrictive covenants such as non-competes because they can help prevent a valuable and important employee from leaving the company and joining a competitor. Along these lines, any employee who is negotiating an employment contract or severance agreement (or who may be terminated involuntarily) should consider the scope and impact of any restrictive covenants. These provisions can significantly impact the employee’s ability to earn a living after leaving his or her current position.
Some states have enacted limits on non-compete agreements. From a policy standpoint, these state laws represent the view that non-competes are unfair to employees.
A question that frequently arises is whether a non-compete entered by a former employee may be enforced against him or her. This can arise, for instance, in the defense of a claim or suit asserted by a former employer alleging that the former employee is violating a non-compete.
Connecticut has no statute that governs non-competes as a general matter. Some professions are specifically restricted by statute, however, e.g., security guards, physicians, and broadcast employees. Any non-compete that is not governed by such industry-specific statutes is governed by court-made law or “common law.” Courts consider enforceability based upon five factors: (1) the duration of the restriction at issue; (2) its geographic scope; (3) the fairness of protections provided to the employer; (4) the impact of the non-compete on the employee’s ability to earn a living; and (5) public interest considerations.
Each of these five factors has been the subject of numerous court opinions in Connecticut and elsewhere. The enforceability of non-compete depends on all facts and circumstances relevant to the above factors. For instance, Connecticut courts have established a “sliding scale” with respect to the duration and geographic scope of non-competes. In other words, a non-compete that is long in duration is more likely enforceable if it is a narrow in scope, and vice versa.
There are additional considerations, as well. Perhaps the most significant is the so-called “blue pencil” rule. In general, this rule allows courts to “blue pencil” (modify) non-competes to salvage them. Not all states follow this rule. Other questions arise related non-competes include the burden of proof associated with challenges to a non-compete and remedies available to an employer or employee involved with such a dispute.
The drafting and enforceability of non-competes defies any “one size fits all” description. As lawyers like to say, the result when non-competes are at issue is “highly fact-specific.” This means that the outcome of a dispute depends on all the unique facts and circumstances relevant to a non-compete.
As with other employment-related issues, an “ounce of prevention” goes a long way. This means that any employer negotiating any non-compete or any other restrictive covenant should always consult with counsel.
The opinions expressed are solely those of the author(s). This content is provided as background and does not constitute legal advice. For more information or to schedule a free consultation, please contact us at info@lalorattorneys.com or (646) 818-9870.
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